Committed to Responsibility

A Boozy Battle Over Distribution

May 16, 2010 08:00 PM

The National Beer Wholesalers Association has mounted a full-court lobbying offensive to find co-sponsors for legislation that supports state-based alcohol regulation and makes it much tougher to file legal challenges to states’ distribution laws.

Joined by the Wine & Spirit Wholesalers of America, NBWA is leading the charge against the Beer Institute, the Distilled Spirits Council of the United States and the Specialty Wine Retailers Association, all of which oppose the bill.

The intraindustry lobbying battle reached a fever pitch after Rep. Bill Delahunt introduced the Comprehensive Alcohol Regulatory Effectiveness Act last month. The Massachusetts Democrat’s legislation follows a Supreme Court ruling issued five years ago, which held that states had the primary responsibility for regulating alcohol distribution but that they could not discriminate against out-of-state producers.

Delahunt said the purpose of the bill is to reinforce the role of states.

Still, Delahunt was unsure of whether the bill will see floor time this Congress.

“Time will tell,” Delahunt said of whether Speaker Nancy Pelosi (D) will give the green light to the legislation.

Congressional Wine Caucus Co-Chairmen Mike Thompson (D) and George Radanovich (R-Calif.) have come out aggressively against the legislation. Thompson is a close ally of Pelosi, a fellow Californian.

“Isn’t it called the beer wholesaler bill?” Thompson asked, noting the lobbying effort by the wholesalers to push the bill.

Thompson, who owns a vineyard in California that sells its grapes to a winery, said states already have the right to regulate alcohol, and the bill is unnecessary.

“I’m making sure people have the facts, rather than relying on some stories,” he added.

Thompson and Radanovich issued a “Dear Colleague” letter last month saying the legislation “picks winners and losers in the wine, beer and distilled spirits sector.”

“These proposals would devastate California’s and other states’ wine industries, stunt economic growth, and harm consumers by allowing discriminatory law and regulation to be passed and go unchallenged,” they wrote.

This is just the latest supplier-versus-wholesaler lobbying battle. In 2005, the sectors were also at odds over shipping rules. At the time, suppliers cheered the Supreme Court ruling, which held that states must allow out-of-state wineries to sell in-state if they allow in-state wineries to do the same. Still, distributors said at the time that the ruling was not a big loss for them because the court ruled so narrowly.

The beer and wine wholesalers say this bill is not intended to target interstate shipping but is focused on thwarting the number of lawsuits stemming from alcohol regulation.

“The American system of state-based alcohol regulation is one of the best in the world, but it is under attack,” the Beer Wholesalers’ Rebecca Spicer said. “Our licensed distributor members take seriously the role they play with states to maintain an orderly marketplace for alcohol.”

NBWA also has the feather in its cap of having 40 state attorneys general supporting the intent of the bill, writing that they “strongly support legislation that will bring to a stop the erosion of state alcohol laws by reinforcing the states’ ability to regulate alcohol as it sees fit.”

NBWA says the bill is targeted at protecting the status quo, which requires most alcohol to go from the supplier to the distributor to the retailer.

In addition to lobbying for the bill, the wholesaler trade group is also planning to “key vote” the legislation for its membership.

“The states need the help today,” said Mike Johnson, a lobbyist at NBWA. “We’ll fight this as long as necessary.”

While the wine wholesalers trade group is so far not key-voting the legislation, WSWA spokesman Jerry Brown said it is critically important.

To highlight the importance, the group ran an advertisement last week in an inside-the-Beltway publication urging Congress to “support your state alcohol laws.”

The Distilled Spirits Council and wine and beer companies are ramping up their efforts to oppose to the measure.

The council’s Frank Coleman said that lawmakers were told this proposal was not controversial.

“The producer tier are all adamantly opposed to the provisions in the legislation,” Coleman said. “It gives them the ultimate authority to regulate their distribution and puts in place a high burden of proof for legal challenges to states’ distribution laws.”

While a companion bill has not yet been introduced in the Senate, the council pre-emptively sent a letter Thursday to all Senators saying the legislation would “strip away the protections of the Commerce Clause requiring even-handed, non-discriminatory treatment of business practices.”